Global Healthcare Analyst

Tina Banerjee

Thematic (Sector/Industry)

<ul>
<li>A new COVID variant JN.1 is spreading fast. WHO has classified JN.1 as “variant of interest” due to its “rapidly increasing spread.” Thus far, JN.1 has not caused severe infection.</li>
<li>Symptoms of JN.1 may not be as mild as Omicron variants. If JN.1 becomes deadlier and more infectious, diagnostics and vaccine players are going to be benefitted primarily.</li>
<li>In this insight we have discussed two Asian vaccine companies and one diagnostic company, which should be kept in the watchlist.</li>
</ul>


A new COVID variant JN.1 is spreading fast. WHO has classified JN.1 as “variant of interest” due to its “rapidly increasing spread.” Thus far, JN.1 has not caused severe infection.
Symptoms of JN.1 may not be as mild as Omicron variants. If JN.1 becomes deadlier and more infectious, diagnostics and vaccine players are going to be benefitted primarily.
In this insight we have discussed two Asian vaccine companies and one diagnostic company, which should be kept in the watchlist.


New COVID Variant Is Emerging; Testing and Vaccine Euphoria May Be Back; Keep Your Watchlist Ready

Equity Bottom-Up

<ul>
<li>In 1H23, biologics division of <a href="https://www.smartkarma.com/entities/lonza-group-ag-d59a4527-e054-4770-89f0-a1dd71a12aa5" target="_blank" data-smartkarma-citation="entities:27917:1" rel="noopener">Lonza Group (LONN SW)</a> reported revenue decline of 1% YoY to CHF1.6B, due to low mRNA sales dragged by lower demand for the COVID-19 vaccines.</li>
<li>Reflecting slower-than-expected growth in early-stage services and continued weak demand for nutraceutical capsules, Lonza has reduced 2023 sales growth expectation and cut core EBITDA margin guidance to 28–29%.   </li>
<li>Growth in 2024 will be impacted by high base, the subsequent mRNA revenue loss, and trial setback faced by small biotech client. Lonza anticipates 2024 margin in the high twenties.</li>
</ul>


In 1H23, biologics division of Lonza Group (LONN SW) reported revenue decline of 1% YoY to CHF1.6B, due to low mRNA sales dragged by lower demand for the COVID-19 vaccines.
Reflecting slower-than-expected growth in early-stage services and continued weak demand for nutraceutical capsules, Lonza has reduced 2023 sales growth expectation and cut core EBITDA margin guidance to 28–29%.   
Growth in 2024 will be impacted by high base, the subsequent mRNA revenue loss, and trial setback faced by small biotech client. Lonza anticipates 2024 margin in the high twenties.


Lonza Group (LONN SW): Customer Driven Events Are Impacting Near-Term Performance

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Shenzhen Kangtai Biological Pr / Equity Bottom-Up

<ul>
<li>The National Health Commission and The People's Daily made "mild" statements about anti-corruption in China healthcare, bringing investors “new hope”. However, there could be a “misconception” regarding the anti-corruption movement. </li>
<li>There was news that some type 2 vaccines could be converted to type 1 vaccines. Even though some vaccines will be affected by this policy, others will not.</li>
<li>Kangtai’s had strong 23H1 net profit, but it has little investment value due to lack of core R&amp;D strength.Kangtai's vaccines face the risk of being included in national immunization program.</li>
</ul>


The National Health Commission and The People's Daily made "mild" statements about anti-corruption in China healthcare, bringing investors “new hope”. However, there could be a “misconception” regarding the anti-corruption movement. 
There was news that some type 2 vaccines could be converted to type 1 vaccines. Even though some vaccines will be affected by this policy, others will not.
Kangtai’s had strong 23H1 net profit, but it has little investment value due to lack of core R&amp;D strength.Kangtai's vaccines face the risk of being included in national immunization program.


China Healthcare Weekly (Sep.15) - Anti-Corruption Turnaround? Vaccine Policy Changes, Kangtai Bio

<ul>
<li>It’s the first time in nearly thirty years for the State Council to directly issue <em>The Guidelines</em> giving specific instructions on attracting foreign investment. Therefore, it’s necessary to interpret the signals behind.</li>
<li>The core requirement is for foreign companies to bring their production capacity/core technology to China (e.g. Tesla, Moderna). The ultimate goal is to help China's industry upgrade, achieve technological breakthroughs.</li>
<li>However, the investment logic of "import substitution" naturally conflicts with attracting foreign investment and guarantee the “national treatment” of foreign-invested enterprises. So, investors may need to change thinking mode/strategies.</li>
</ul>


It’s the first time in nearly thirty years for the State Council to directly issue The Guidelines giving specific instructions on attracting foreign investment. Therefore, it’s necessary to interpret the signals behind.
The core requirement is for foreign companies to bring their production capacity/core technology to China (e.g. Tesla, Moderna). The ultimate goal is to help China's industry upgrade, achieve technological breakthroughs.
However, the investment logic of "import substitution" naturally conflicts with attracting foreign investment and guarantee the “national treatment” of foreign-invested enterprises. So, investors may need to change thinking mode/strategies.


China's Extremely Rare Policy to Attract Foreign Investment and the Signals Behind

<ul>
<li>In Q1FY24, <a href="https://www.smartkarma.com/entities/shionogi-co-ltd" target="_blank" data-smartkarma-citation="entities:19535:1" rel="noopener">Shionogi &amp; Co (4507 JP)</a> recorded 52% YoY revenue growth to ¥109B, reflecting a one-time payment received for the transfer of co-development and co-commercialization license for ADHD drugs.  </li>
<li>Shionogi has reiterated FY24 guidance. The company expects FY24 revenue of ¥450B (up 6% YoY), operating profit of ¥150B (up 1% YoY), and net profit of ¥155B (down 16% YoY).</li>
<li>Despite competition, Xocova captured a 60% market share of the treatment group patients in Japan. Over a six-month period since emergency approval, more than 70K patients have used Xocova.</li>
</ul>


In Q1FY24, Shionogi &amp; Co (4507 JP) recorded 52% YoY revenue growth to ¥109B, reflecting a one-time payment received for the transfer of co-development and co-commercialization license for ADHD drugs.  
Shionogi has reiterated FY24 guidance. The company expects FY24 revenue of ¥450B (up 6% YoY), operating profit of ¥150B (up 1% YoY), and net profit of ¥155B (down 16% YoY).
Despite competition, Xocova captured a 60% market share of the treatment group patients in Japan. Over a six-month period since emergency approval, more than 70K patients have used Xocova.


Shionogi & Co (4507 JP): Non-Recurring Income Lifts Q1 Revenue; FY24 Guidance Reiterated

United States

Moderna, Inc. operates as a biotechnology company. The Company focuses on the discovery and development of messenger RNA therapeutics and vaccines. Moderna develops mRNA medicines for infectious, immuno-oncology, and cardiovascular diseases.

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Moderna (MRNA US)

New COVID Variant Is Emerging; Testing and Vaccine Euphoria May Be Back; Keep Your Watchlist Ready

A new COVID variant, JN.1, is spreading rapidly and has been classified as a "variant of interest" by WHO. If it becomes deadlier, vaccine and...

Tina Banerjee

Lonza Group (LONN SW): Customer Driven Events Are Impacting Near-Term Performance

Lonza's biologics division saw 1% decline in revenue in 1H23 due to lower demand for COVID-19 vaccines, leading to reduced sales growth...

Tina Banerjee

China Healthcare Weekly (Sep.15) - Anti-Corruption Turnaround? Vaccine Policy Changes, Kangtai Bio

Investors have renewed hope in China healthcare due to potential turnaround in anti-corruption. China may change vaccine policy, which will affect...

Xinyao (Criss) Wang

China's Extremely Rare Policy to Attract Foreign Investment and the Signals Behind

Attracting foreign investment is commonplace and investors may not realize the importance,but new policy released by the State Council will bring...

Xinyao (Criss) Wang

Shionogi & Co (4507 JP): Non-Recurring Income Lifts Q1 Revenue; FY24 Guidance Reiterated

In Q1, revenue surged 52% YoY to ¥109B, reflecting a one-time payment received for the transfer of the license for ADHD drugs. Shionogi expects...

Tina Banerjee

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

New COVID Variant Is Emerging; Testing and Vaccine Euphoria May Be Back; Keep Your Watchlist Ready

​A new COVID variant, JN.1, is spreading rapidly and has been classified as a "variant of interest" by WHO. If it becomes deadlier, vaccine and...

Tina Banerjee

Lonza Group (LONN SW): Customer Driven Events Are Impacting Near-Term Performance

​Lonza's biologics division saw 1% decline in revenue in 1H23 due to lower demand for COVID-19 vaccines, leading to reduced sales growth...

Tina Banerjee

China Healthcare Weekly (Sep.15) - Anti-Corruption Turnaround? Vaccine Policy Changes, Kangtai Bio

Investors have renewed hope in China healthcare due to potential turnaround in anti-corruption. China may change vaccine policy, which will affect...

Xinyao (Criss) Wang

China's Extremely Rare Policy to Attract Foreign Investment and the Signals Behind

Attracting foreign investment is commonplace and investors may not realize the importance,but new policy released by the State Council will bring...

Xinyao (Criss) Wang

Shionogi & Co (4507 JP): Non-Recurring Income Lifts Q1 Revenue; FY24 Guidance Reiterated

In Q1, revenue surged 52% YoY to ¥109B, reflecting a one-time payment received for the transfer of the license for ADHD drugs. Shionogi expects...

Tina Banerjee

A new COVID variant, JN.1, is spreading rapidly and has been classified as a "variant of interest" by WHO. If it becomes deadlier, vaccine and...

Lonza's biologics division saw 1% decline in revenue in 1H23 due to lower demand for COVID-19 vaccines, leading to reduced sales growth...